Analysts: AMD's foundry spin-off may save company

Analysts praise AMD for splitting off its chip-manufacturing business.

The deal should put pressure on Intel to improve its technology, added Roger Kay, president of Endpoint Technologies Associates.

"The deal makes AMD much more viable over the long run, which directly challenges Intel, and that it will chase Intel into process manufacturing down at least to 22nm (nanometers) both as a chip company and as a foundry," Kay wrote in an e-mail. "The deal also puts other Intel competitors, like nVidia, in a better position by supplying a great alternative foundry."

Intel doesn't yet know enough about the deal to understand how it will work, said Intel spokesman Chuck Mulloy. Mulloy called on AMD to allow the details of a confidential cross-licensing agreement between the two companies to be released to the public so that investors can understand the relationship.

Intel will stick with its approach of both making and designing chips, Mulloy said. An integrated design and manufacturing process can reduce time to market and result in better quality and lower costs, he said.

"We have long believed there are significant advantages to being an integrated device manufacturer," he added.

The deal could have a larger impact on other chip foundries, such as Taiwan Semiconductor Manufacturing Co. (TSMC), which supplies chips for AMD's ATI graphics processor arm, said Kay and Gold.

ATI's business with TSMC will continue for now, Gold said. "But eventually I would expect AMD to consolidate its designs around one fab process and one manufacturer," he added. "With the large investment they are making in CPU designs with the new foundry company, I expect that they will ultimately move their GPU designs over as well, cutting business with TSMC substantially."